International agreements, such as the agreement on the free movement of labor within the European Union and the European Economic Area, have made it easier for people to move between countries for work. This increased mobility has had a significant impact on the Icelandic labor market and society.
The number of foreign workers in Iceland has fluctuated over the past decades, particularly due to the 2008 economic collapse and the COVID-19 pandemic. After the economic collapse, the number of foreign employees increased significantly, especially from Eastern Europe. Following the collapse, the number of immigrants decreased somewhat, but demand for foreign labor has steadily risen in the wake of the pandemic. The vast majority of foreign workers on the Icelandic labor market are from European Economic Area (EEA) countries. Most immigrants are aged 25–49, with relatively few categorized as children, young people, or senior citizens.
In 2024, one in four individuals in the Icelandic labor market was an immigrant. Immigrants fill many positions that have proven difficult to staff with domestic workers. They pay taxes, participate in the economy, and contribute to economic growth by increasing productivity and consumption. Researchers have pointed out that in a typical OECD country, a 0.1% increase in the immigrant population raises GDP per capita by 0.25% in the first year, peaking at a 0.31% increase one year after the migration. Immigrants in Iceland generally exhibit very high labor force participation compared to other OECD countries, with a participation rate of around 89%, higher than the 84% rate among native-born Icelanders. OECD studies show that in many countries, tax revenues from immigrants are sufficient to cover the public expenditures associated with their stay.
Foreign workers bring new knowledge, experience, and ideas that can enrich workplace culture and foster innovation. Immigrants work in sectors such as technology, agriculture, retail and services, healthcare, and energy, to name a few. Many have started businesses, ranging from small family-run enterprises to large companies, creating jobs in the process. Numerous new restaurants owned by immigrants have emerged, and many stores now offer food products previously unavailable in Iceland, among other contributions.
Foreign workers influence not only the labor market but also the shaping of Icelandic society. Immigrants contribute to increased diversity and cultural enrichment. They come from diverse cultural backgrounds, speak various languages, and bring unique customs, fostering understanding and respect between different groups.
Immigrants are now an indispensable part of the Icelandic labor market and will continue to play a key role in meeting the demand for labor. A report presented by the Prime Minister to Parliament during the last legislative session referenced OECD evaluations of the economic impact of migration. According to research, migration has positive long-term effects on GDP per capita, and this is expected to be the case in Iceland as well. The OECD estimates that migration will result in a 6.5% increase in GDP by 2030 and a 10.4% increase by 2040 compared to a scenario without migration.
It is vital to ensure that immigrants in the labor market receive fair treatment and support to establish themselves in society. Let us welcome foreign workers and ensure they have the same opportunities as native-born Icelanders.